By Benedict De Meulemeester on 26/11/2012
Contribution by Baptiste Desbois
Last week, Daniel Cohn-Bendit, Member of the European Parliament, regretted the French tendency to "seek mirages" referring to a decision in France to allow research into the possibility of producing shale gas in a more environmentally friendly way. Green activists across Europe are eager to keep us from ever producing shale gas because they think its production is causing environmental damage. In this eagerness, they now go as far as to condemn the research into the possibility of producing the gas without the environmental damage. Are we stuck in the same situation as in the 17th century, when Galileo was condemned for his audacity to research an alternative cosmology? Do we have to narrow-mindedly present shale gas to the Inquisition, without looking further than the tip of one’s nose, and without looking for progress on the subject? As emphasized by Mr. Mestralet, CEO of GDF Suez, France systematically closes the door before opening it.
Certainly, hydraulic fracturing raises questions. However, it is condemned without much further thought due to strong propaganda, without much real evidence of its effects on the environment. The purpose of this blog is not at all to praise shale gas but to highlight the absurdity of the current situation. Of course, any ecological disaster must be prevented in every possible way. François Hollande claims there is no evidence that the exploitation of shale gas by hydraulic fracturing is free of heavy risks to health and to the environment. But neither is there convincing evidence to the contrary, nor that there aren’t alternative solutions. It’s like sweeping the hopes for a return to the industrial competitiveness of France. Why would shale gas be rejected in case clean technology can be found, combined with transparent governance?
The recent “Gallois” report ordered by Hollande and issued in early November, clearly recommends conducting research for exploiting shale gas to boost France's international competitiveness. Ironically, Pawlak, Polish Minister of the economy then said: Total is welcome to try this at home! ". In the aftermath, the European Parliament, more open to discussions, rejected an amendment proposing to place a moratorium on the exploitation of shale gas, but calls for back up with "robust regulatory regimes". Will France finally open its eyes and look more closely at this potential gold mine on which it might be sitting? What would General De Gaulle think of a France that refuses to research the possibility of exploiting its natural resources?
After a strong mobilization, France became the first country to ban the use of hydraulic fracking in July 2011, with the Jacob law. Based on this law, Nicolas Sarkozy and Nathalie Kosciusko-Morizet canceled three licenses for shale gas exploration in the south of France in December 2011 (two from the American Schuepbach and one from Total), grabbing full attention in the media. In addition, Sarkozy also confirmed that other operators "can’t proceed with the exploration or exploitation of gas and oil shale based on the hydraulic fracking technique". The discussion was then closed under the Sarkozy era; tensions went down although the pressure set by the industry has always been maintained.
Change of government in 2012 led to the re-opening of the debate. Prime Minister Jean-Marc Ayrault woke the sleeping topic by saying that the debate related to the exploitation of shale gas was still open and will be handled by Holland during the environmental conference. Montebourg also fueled the controversy by claiming that shale gas is not a forbidden subject at all, driving ecologists mad. As Minister of Industrial Renewal, he is at the forefront to understand all shale gas opportunities. On the environmental conference on the 14th and 15th of September, François Hollande made it clear that he aims to follow the same line as Sarkozy. He announced that he "listens to the economic arguments," but said that considerations on shale gas in France were "frequently exaggerated", coupled with too much environmental uncertainties to allow the exploitation. He said this guideline will be firm throughout his five years as president and by the way took this opportunity to dismiss seven applications for exploration licenses. This made an end to the debate.
A new announcement came from Hollande on the 3rd of November: he expressed his support to research of other techniques to exploit shale gas. He automatically excluded hydraulic fracturing but accepted that researchers work on that topic, "funded by businesses and researchers". He confirmed that he would take responsibility if an environmentally friendly technique would suddenly pop up.
New turn of events and new pressure: On the 5th of November, the Gallois report (ordered by the government to propose measures to rebuild competitiveness of France) is given to Ayrault. 22 measures were proposed to reset wheels in motion. The fifth proposal was about shale gas! The report proposes to "conduct research on technical exploitation of shale gas ", possibly in collaboration with Germany. Logically, the government immediately announced that this measure would not be retained.
Latest twists and turns: The Economic Affairs Committee of the Senate has decided to reopen the debate on shale gas and ask the Parliamentary Office for Evaluation of Scientific and Technological Choices (OPECST) to examine alternatives to fracking. This same committee believes it would be "regrettable to prohibit reflection and research for the development of environmentally friendly technologies" and indicates that the goal of the research is to better evaluate the resources in France. To be continued…
But what quantities are we talking about?
Based on current knowledge, it is very difficult to identify the potential of shale gas in France. Resources appear to be concentrated in two large basins around the Paris region and in the south of France. This last basin is assumed to be the most interesting from a geological point of view. However, they belong to densely populated and/or touristic areas, partly explaining the current reluctance for producing gas.
Source: International Energy Agency, OECD 2012
The U.S. Energy Information Administration released in 2011 a study in which recoverable resources are compared in several countries European countries (the study is available at http://www.eia.gov/analysis/studies/ worldshalegas/pdf/fullreport.pdf).
The figures mentioned in this report evolve depending on the current knowledge (In Poland, for example, the Geological Institute has sharply revised the estimate for this country). However, it provides the reader with a first idea about what we are talking about. France is expected to owe about 5.1 trillion cubic meters of shale gas, and stands therefore at second place after Poland. Both countries owe most of the resources in Europe. Ukraine ranks third, but with about 5 times less volume than France.
The consumption/resource ration is virtual but still an interesting indicator. It tells us the number of years that can be covered by shale gas (relative to current consumption). In that case, Poland is widely ahead: The resource might cover more than 300 years of consumption! Denmark is second (about 150 years) and France third with about 100 years. Of course, these figures should be read with care: the overall potential may prove to be much less than predicted here, and the proportion of economically recoverable resource might represent a low ratio. Also, experience in the US has shown that when more gas is produced, consumption also picks up. It is also to be expected that France would export much of its shale gas if it would produce it. However, the interest in shale gas is largely justified.
What would be the economic impact?
98% of the gas consumed in France is imported (32% from Norway, 15% from the Netherlands, 14% from Russia, 14% from Algeria …), often through long term contracts. 40 years ago, this dependence was only 70%. The impact on the bill has thus increased during these years, to reach 9.7 billion euro in 2010 (according to the General Commission on Sustainable Development).
To illustrate the economic impact, let’s have a closer look at the price relaxation caused by the shale gas revolution in the United States on the spot market, and compare it with the prices in France (PEG Nord spot product traded on the PowerNext exchange). In the United States, more than a quarter of the gas is now coming from this unconventional cheap resource (and this proportion is expected to grow to 50% in 2035, according to some scenarios established by the U.S. Energy Information Administration), relaxing the market price of gas.
Since 2010, the price gap between France and the United States has gradually increased to reach more than 18 €/MWh at this moment. The American gas price remains below the threshold of 10 €/MWh, and is less volatile. In France, the price per MWh currently exceeds 27 euro (170% more expensive!). At this point, there is no need to describe the thoughts of consumers of natural gas, especially large industrial consumers, when they see such a gap.
Moreover, in France, and more generally in Europe, the gas demand is decreasing but prices remain stuck at historically high levels, mainly because of tight supply (reserves depletion in the North Sea, LNG diversion to Japan ...). France is complaining of increasing gas prices, but refuses systematically the shale gas option without even taking the time to study it. It has been announced that nearly 4 million households are living in a precarious energy situation in the country! Of course, France doesn’t face the same situation as the United States. The exploitation of shale gas requires a lot of wells and space. A huge quantity of water is required, together with a dense network of gas pipelines. The situation is more difficult in France. However, Christophe de Margerie, CEO at Total said "When you're in a difficult economic situation like today, and you don’t take the opportunity to develop the gas, it's a shame." The idea is not to praise this energy, but there are some interesting factors that would allow France to improve the current situation, in addition to the security of supply and cost benefits. However, remaining uncertainties are very large.
What are the issues?
The purpose of this article is not to discuss whether the exploitation of shale gas is harmful for the environment or not. Nobody pretends to know, as studies are often contradictory. This must be investigated precisely and scientifically. If it’s not possible to develop good practices, better to keep the door closed! If better technologies can be developed, the debate should remain open.
Green activists are against shale gas production for two reasons. First of all, the Gasland movie is a masterly piece of suggestive filming. Anyone (including me) with some sense of environmental justice will feel thoroughly shocked after seeing it. What are these big bad gas companies doing to these poor people? However, a few days after watching it, you start to realize that if any at all, the “evidence” in the movie is anecdotic. For example, the actor/director Josh Fox is continuously taking water samples, suggesting pollution, but the test results of these samples are never shown. Secondly, environmental activists across the globe are increasingly alarmist about global warming. Recent reports on arctic ice melting point out that they are right in doing this. However, they loose all sense of pragmatism and want the use of all fossil fuels to end immediately. This includes natural gas, which was hailed just two decades ago by environmentalists as the least polluting fossil fuel. Opposition to shale gas is also based on idealistic refusal of any fossil fuel use.
On the other hand, shale gas is not an infamous or ugly gas, as the population seems to believe. It is standard gas, but trapped in an unconventional reservoir. And the carbon footprint linked to the combustion of gas is better than burning oil or coal! U.S. emissions of greenhouse gases are rapidly falling as coal plants are closing one after another because of the competitive natural gas price. The problem lies in the methods of production (leakage) and in the water usage. If new environmental-friendly methods would appear, would this reluctance disappear?
The second point is the marginal image of gas conveyed in France. With the high nuclear rate in France, gas is a fuel that tends to stay at the background. The French trend of electric heating is also erasing the importance of natural gas. I am convinced that the discussions would have been less negative if the topic was oil shale. The impact on the wallet would be more meaningful and people would be more easily convinced, although oil is more harmful than gas.
The door has been closed even before it was half-opened. The problem lies in the blindness and the refusal of any discussion. Why refuse research? Why assert without proof that hydraulic fracking is harmful, and can’t be improved? Why closing the door before looking for alternatives? It’s also difficult to believe that shale gas will not be exploited in the future, even if environmental studies play against them. The larger the resources turn out to be, the more difficult it will be to withhold from producing them. Hence, environmentalist’s strategy of blocking research into the potential.
In case no decision would be taken regarding shale gas, it would be great to support a choice of speeding up the development of renewable sources of energy. Replace traditional gas heaters with heat pumps for example! Or speed up marine technologies! France has the second world largest maritime area, and is positioned at the forefront for some technologies. The worst decision would be to continue to do nothing...